David Cameron was facing pressure tonight to explain whether the Conservatives have complied with the spirit of electoral law after the party accepted £100,000 from the British wing of a company controlled by a multibillionaire Lebanese former arms dealer.

Labour accused the Tories of returning to the era of sleaze after the party accepted two donations of £50,000 from the British arm of Future Pipe Industries, controlled by Fouad Makhzoumi, an ally of the disgraced former Conservative cabinet minister Jonathan Aitken. Future Pipe Ltd donated £50,000 to the Tories one month before the 2005 general election. A second donation for the same amount was made in August last year.

The Daily Mail reported that records at Companies House show that Future Pipe Ltd made £20,000 in pre-tax profits last year. In 2005 it made a pre-tax profit of £21,000. The firm's parent company, Future Pipe Industries, based in Dubai, is expected to turn over £600m this year.

The Tories said the donations were legal. A spokesman said: "Our compliance unit applies two strict tests to all company donations in accordance with Electoral Commission guidance. They are: is the company UK-registered and is the company carrying on business in the UK? These donations met those tests and were therefore legal and permissible."

But John Mann, Labour MP for Bassetlaw, asked the Electoral Commission to examine whether they were within the spirit of the law.

In a letter to Peter Wardle, the commission's chief executive, Mann wrote: "I am writing to ask you to immediately investigate whether both these donations comply with both the spirit and the letter of the law. Are you able to give me an assurance that the company involved in these two donations, Future Pipe Ltd, was carrying out business in the UK when both these donations were received and that no foreign donations were given through this company?"

Denis MacShane, Labour MP for Rotherham, said: "This shadowy deal has all the hallmarks of John Major-era Tory sleaze and David Cameron should come clean straight away and explain where this money has come from and why."

The donations will raise questions about Michael Spencer, the Tory treasurer, and other leading party figures. Spencer, who faced embarrassment last week when the US subsidiary of his broking firm Icap was fined $25m (about £15.6m) by the US authorities, has widened the Tory funding base by cutting back on large donations and accepting more donations of £50,000.

George Osborne, the shadow chancellor, and Andrew Feldman, the party's chief executive and fundraiser, faced criticism last year after discussing a £50,000 donation from the Russian oligarch Oleg Deripaska. Had this been accepted, the donation would have been channelled through LDV, a British firm owned by Deripaska.

In a statement explaining his role in the affair, Osborne said: "Feldman explained a political donation is only lawful if you appear as an individual on the UK electoral roll, or if the donation comes from a legitimate UK trading company."

Back to haunt Tories

Jonathan Aitken is a former Tory cabinet minister jailed for "calculated perjury" in 1999 after lying in a libel action he brought against the Guardian and Granada Television.

Aitken once described Fouad Makhzoumi as a "good and trusted contact" who opened doors in Saudi Arabia and pre-Gulf war Iraq. Aitken and Makhzoumi were co-directors of Future Management Services (FMS), a position Aitken relinquished after seven years when he was appointed defence procurement minister in 1992.

While a minister, Aitken helped Makhzoumi broker a deal in which British companies sold rifles, armoured personnel vehicles, and bomb disposal equipment to the Lebanese government, the Guardian's QC, the late George Carman, alleged during the 1997 libel trial. Aitken told the trial he was promoting British defence exports.

His libel trial collapsed when the Guardian was able to prove that he had lied in claiming that his then wife, Lolicia, had paid a bill at the Paris Ritz in 1993. The bill had been paid by Aitken's former business partner, Said Ayas, on behalf of Prince Mohammed, a son of the Saudi king.